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Scenario: As a software developer I create a WordPress extension that does x which I sell for, let's say, $20. When buying it's clearly mentioned you are only allowed to install it on a single website.

When you install it on your website and try to run it for the first time you are asked to enter your license key and accept, by ticking a box, that if you use it without a proper key or use it on multiple websites with a single key you will be taken to court and have to pay me $5000 plus attorney fees for each unlicensed install.

Question: Is this legal? Is it enforceable?

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  • Any particular part of the EU?
    – Studoku
    Dec 12 '20 at 23:20
  • @Studoku Not sure it's relevant but customers will be all over Europe. Developer in the Balkans. Dec 12 '20 at 23:34
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Probably not. This condition is what's known as a penalty clause, which is not universally allowed. This article discusses penalty clauses in EU law. In the English-Belgian variety, the clause is simply not enforceable. In the Dutch-French and German-Swiss models, such a clause might be enforceable, but the judge can adjust disproportionately high amounts – 250 times the normal price strikes me as disproportionately high. It isn't clear what amount the courts would deem to be reasonable and fair: but the infringer would have to request a reduction in the amount.

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  • Thanks for the great answer. If it's spelled out that the $20 is "below market rate" only because the seller expects everyone to buy a proper license could the disproportional penalty be justified? If not, how can someone enforce a contract if the best they can get out of the "pirate" is, let's say, $100 to $200 (which is like a couple of hours worth of a lawyer's time)? Dec 13 '20 at 3:37
  • 1
    Selling a thing for $20 is pretty good evidence that $20 is the market rate. This is a case where you'd need specific legal advice from an attorney to find the right figure for an incentive penalty.
    – user6726
    Dec 13 '20 at 5:43
  • The competition is 50%-100% more expensive so $20 is well below market rate (percentage-wise at least). In any case if this software ever gets built and the clause is put in an attorney will be contacted, this question is simply part of "market research". Thanks for your help! Dec 13 '20 at 6:35
  • @nickpapoutsis market rate is what your product is sold for.
    – Trish
    Dec 14 '20 at 5:27
  • @Trish If 100 farmers sell apples for $1/pc the market rate is $1/pc. If I want to sell mine for $0.5/pc or $2/pc the market rate is still $1/pc. Dec 14 '20 at 19:16
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Installing your software for a second website would be very likely copyright infringement, and you would be able to sue about that. What would most likely be most damaging for the website owner is that you can demand they stop using your software. And even though you are normally willing to sell a license for $20 to anyone who asks, you could (most likely) refuse to sell these people a license for less than $5,000.

What you try to do however is tricky. You would have to prove that the website owner agreed to your terms, and that is difficult. They can say "We never had any intention to agree to the license terms. We intended to use the software contrary to copyright law, and only pressed the 'accept terms' button in order to be able to commit copyright infringement". If accepting your license would be worse for them than committing copyright infringement, then they can make that choice.

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